Plus: EA tops software charts for week after Thanksgiving

BambiFrancisco

One person who's betting it will is Robert Thomas, CEO of NetScreen Technologies, a maker of security appliances. He sees the world of security transforming in the explosive computing world.

The trend in delivering security via appliances -- as opposed to using software -- is a path that was taken by other IT products, Thomas says. Explaining that evolution, the CEO says companies initially used software to route data and serve the role played today by gadgets like routers and switches.

"As networks became bigger, switchers and routers evolved into appliances," he said in an interview as NetScreen
NSCN
marking its one-year anniversary as a public company. "We predicted that security would be a networked feature."

In other words, NetScreen is banking that security would be pushed more into the infrastructure of the network rather than being a stand-alone software application that runs on computer servers.

Thomas hopes companies will increasingly favor these appliances over software to protect their networks with firewalls, VPNs and intrusion detection.

On Thursday, the anniversary of the IPO, the company's shares appear not to have grown up much from its $16 initial price. The shares were changing hands at $16.44 in recent trading.

At that price, investors have high hopes. NetScreen shares trade at 50 times next year's estimated earnings of 32 cents a share.

And, even if the company is cash-flow positive, part of that cash is a result of executives and employees exercising their options.

NetScreen says its cash flow is positive. But about 17 percent of that is cash in April through June was from employees giving the company money to exercise their stock options, according to Thomas.

Not that NetScreen, based in Sunnyvale, Calif., isn't proving to be popular with companies that want to secure their networks.

Quarterly sales for at least the last three reporting periods have been successively higher. And they're expected to grow another 10 percent sequentially to $45 million in the current quarter -- that's up 55 percent from the comparable period last year.

Analysts have noted that NetScreen has taken market share away from larger rival Check Point Systems
CHKP, +0.84%

Looking ahead, Thomas is setting his sights on intrusion detection and protection products, a growing market currently worth up to $800 million. He hopes to take business away from Internet Security Systems
ISSX
and Cisco Systems
CSCO, +1.85%
both of which have aging products.

Thomas said NetScreen expects to have an appliance loaded with intrusion-protection features, along with firewall and VPN technology, ready to sell in one year.

Gaming software under the tree

Gaming software typically ranks among the best-selling software, while some anti-virus software weaves its way to the top as well.

But the latest tally of software sales during the week after Thanksgiving shows that Electronic Arts
ERTS
swept the top three spots across all categories.

The NPD hit list shows that either consumers are numbing themselves with video games and ignoring computer viruses, or computer viruses are lessening.

More than likely, the trend is the former. Besides, it's the holidays, and who would give anti-virus software for Christmas?

At the top of the charts were EA's "The Sims: Unleashed Expansion Pack," "The Sims Deluxe" and "Harry Potter & The Chamber of Secrets," topped NPD's hit list for the week of Nov. 24 through Nov. 30.

Shares of EA traded at $61.29, up slightly in Thursday trading.

Of note ...

AOL Time Warner
AOL
lost 1 percent to $13.51. On Wednesday, the Internet and media giant quietly let go 300 more employees in its battered online unit, a source close to the company said. The job cuts represent about 1.5 percent of a staff that numbers 18,000. Employees from offices across the country, 60 of whom worked at the Mountain View, Calif. offices.

Seagate
STX, +3.87%
a maker of disk drives, saw shares fall another 2 percent on its second day of trading as a public company. Shares traded at $11.24 in recent trading. Seagate priced at $12 per share Tuesday evening, raising $870 million. It's one of the biggest tech IPOs since Accenture was offered in July 2001. See IPO report. Seagate was originally set to price between $13 and $15. Seagate ended the session at $11.50, down 4 percent on its inaugural day.

Hoover's
HOOV
rose 3 cents to $7.08, a per share price that's above the level D&B said it would pay to buy the company.

Responding to claims made by a large shareholder that Hoover's did not shop itself around for a better price, spokesman Frank Milano said the company could not "encourage or solicit another bid." He did add, however, that the board could consider "any superior proposals that might be presented." Milano wouldn't comment on whether Hoover's received any other bids.

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Bambi Francisco's Net Stocks is available daily via e-mail. Sign up for the column at CBS.MarketWatch.com. You can also subscribe to Bambi Francisco's Net Sense, a weekly commentary. Read the latest version. See: Boom, bust and the IPO.

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